Cato’s David Boaz Turns Goldbug
The Cato Institute usually doesn’t mess around with the way-outside-the-mainstream elements of the libertarian worldview (see Chris Hayes for some of this) and certainly not with the elements of hard-core anti-statism that the business community would find very distressing. But with the economy in crisis, a lot of people are feeling somewhat ideologically discombobulated (myself included, at times) so I suppose it’s not shocking to see some loopy ideas moving closer to the mainstream. At the same time, there’s another trend that Brad DeLong’s been calling attention to, namely the fact that the present crisis has reached a level where even Milton Friedman’s ideas suggest that we should be doing stimulus. Brad, with touching naiveté, seems to think that that means that people normally inclined to admire Friedman should start agreeing that stimulus is a good idea. What’s happening, in fact, is that people normally inclined to admire Friedman are embracing fringy “Austrian” ideas (or Ayn Rand books) since the point of admiring Friedman is to reach the conclusion that government intervention is always economically ruinous.
All of which is by way of introducing the fact that Cato Institute Executive Vice President David Boaz apparently thinks we should adopt the gold standard and abandon “fiat money.” Of course, contractionary monetary policy amidst a sharp worldwide recession would doom us to years and years of misery. And during the Great Depression, nations’ ability to recover was strongly linked to their willingness to abandon gold.
Paul Krugman’s old post on “The Goldbug Variations” is always worth re-reading.
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FDR, Reagan and Our Current Predicament
CNBC had a segment last night in which Cato’s David Boaz and CAP’s Heather Boushey debated whether Ronald Reagan or FDR would make the best model for Barack Obama. It’s striking that the host starts out by saying that “FDR and Reagan both faced similar crises in their presidencies” even though they didn’t, in fact, face similar crises. Reagan faced a situation when the inflation rate was very high. This led the Fed to raise interest rates and strangle the economy in an effort to choke inflation. That worked, but it created a big recession. This is nothing like our current recession, where we’re trying to ward off the possibility of deflation:
Heather makes this point straight out of the gate. At this point, the anchor seems to agree that her intro was totally off-base, but it makes you wonder why she said it in the first place. Boaz, meanwhile, agrees that the situation doesn’t resemble the situation Reagan faced, but then just says we need Reaganite policies anyway! Which I suppose is a pretty good encapsulation of libertarianism’s one-note approach to public policy.
But the fact remains that these are different situations and the differences are important. We shouldn’t just emulate what FDR did. But that’s because some of the things FDR did were bad ideas. What we need is to do something similar to what we would advise FDR to do if we had a time machine. To model our approach on what worked in Depression-era policymaking (not just in the U.S., but abroad) and that avoids what didn’t work or what was counterproductive. The Reagan era is just irrelevant. Reagan did some good things, like remaining relatively steadfast in the face of the short-term pain caused by Volcker’s interest rate policies. And he did a lot of bad things. But you don’t want to emulate either of those things because the situation is different.
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